All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific...
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Transcript of All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific...
![Page 2: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/2.jpg)
What are they?
CORPORATE BOND• a corporation’s
written pledge to repay a specific amount of money, along with interest.
GOVERNMENT BOND• written pledge of a
government or municipality (city) to repay a specific sum of money with interest
![Page 3: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/3.jpg)
BOND BASICS3-5% Return Over Time
SHORT TERM <10 years
LONG TERM 10-30 years
GOVERNMENTSafest, federal gov. isn’t going
anywhere, lowest return
MUNICIPLE Pretty safe, includes local and state governments
CORPORATELonger term usually has a better
return than shorter term, but you are betting the co. will still be around
HIGH YIELD (JUNK) Highest rate of return, but the riskiest of all the bonds
![Page 4: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/4.jpg)
CORPORATE BONDS• Legal document that details all the
conditions of the bondBond Indenture• When a bond will be repaid
(usually 1-30 years)Maturity Date
• Dollar amount bondholder will receive @ maturity. Corp bonds usually have a face value of $1000
Face Value
• Allows a company to buy back bonds before they mature. Usually the company pays a fee to the holder if they do this
Call Feature
• Interest rateCoupon
![Page 5: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/5.jpg)
How BONDS Work:
1. You pay $1,000 for a 15 year AT&T Bond at 7.5% interest/year.
2. Each year, you get $75 (1000*.075)
3. After 15 years, you get your $1000 back
TOTAL EARNED = $75*15 years = $1125
![Page 6: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/6.jpg)
![Page 7: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/7.jpg)
GOVERNMENT BONDSTR
EASU
RY B
ILLS
(T-B
ILLS
) • Sold in units of $1000
• Mature in weeks (4, 13, 26, 52)
• “Discounted Security” – you pay LESS than the face value
TREA
SURY
NO
TES • Sold in units of $1000
• Mature in 10 years
• Higher rate than a T-Bill
US
SAVI
NG
S BO
ND
S • Purchase price is ½ Face Value ($100 Bond costs $50)
• Can redeem anytime from 6m to 30y (get what you paid + interest)
• Not taxed by state, but must pay FED taxes when you cash it in
![Page 8: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/8.jpg)
What Does a Savings Bond Look Like?
![Page 9: All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.](https://reader030.fdocuments.net/reader030/viewer/2022032702/56649cc15503460f94987f31/html5/thumbnails/9.jpg)
How to buy government bonds, or look up your bond info:
• www.savingsbonds.gov